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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
Forest Laboratories, Inc. has a M-score of -3.03 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Forest Laboratories, Inc. was -1.45. The lowest was -4.96. And the median was -2.46.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Forest Laboratories, Inc. for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.9136||+||0.528 * 0.9957||+||0.404 * 0.8532||+||0.892 * 1.0175||+||0.115 * 0.8761|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0345||+||4.679 * -0.0196||-||0.327 * 1.9566|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $370 Mil.|
Revenue was 878.396 + 855.255 + 832.935 + 845.949 = $3,413 Mil.
Gross Profit was 696.126 + 691.537 + 667.568 + 668.123 = $2,723 Mil.
Total Current Assets was $4,293 Mil.
Total Assets was $9,059 Mil.
Property, Plant and Equipment(Net PPE) was $396 Mil.
Depreciation, Depletion and Amortization(DDA) was $182 Mil.
Selling, General & Admin. Expense(SGA) was $1,680 Mil.
Total Current Liabilities was $1,040 Mil.
Long-Term Debt was $1,200 Mil.
Net Income was 17.961 + 69.987 + 23.278 + 45.443 = $157 Mil.
Non Operating Income was 0 + -7.801 + -4.164 + -29.15 = $-41 Mil.
Cash Flow from Operations was 202.934 + 156.134 + -28.196 + 44.813 = $376 Mil.
|Accounts Receivable was $398 Mil.
Revenue was 716.281 + 760.637 + 821.127 + 1055.713 = $3,354 Mil.
Gross Profit was 562.97 + 610.914 + 652.904 + 838.139 = $2,665 Mil.
Total Current Assets was $2,877 Mil.
Total Assets was $7,485 Mil.
Property, Plant and Equipment(Net PPE) was $376 Mil.
Depreciation, Depletion and Amortization(DDA) was $143 Mil.
Selling, General & Admin. Expense(SGA) was $1,596 Mil.
Total Current Liabilities was $946 Mil.
Long-Term Debt was $0 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(369.881 / 3412.535)||/||(397.909 / 3353.758)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(691.537 / 3353.758)||/||(696.126 / 3412.535)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (4293.118 + 395.573) / 9058.742)||/||(1 - (2876.855 + 376.045) / 7485.31)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(143.212 / (143.212 + 376.045))||/||(181.744 / (181.744 + 395.573))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(1680.136 / 3412.535)||/||(1596.127 / 3353.758)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((1200 + 1040.03) / 9058.742)||/||((0 + 945.99) / 7485.31)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(156.669 - -41.115||-||375.685)||/||9058.742|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Forest Laboratories, Inc. has a M-score of -3.03 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Forest Laboratories, Inc. Annual Data
Forest Laboratories, Inc. Quarterly Data